Schneider to Buy Majority Stake In Luminous Power

By

Divya Guha of Mint

May 31, 2011 8:55 a.m. ET

NEW DELHI (Mint)--France's Schneider Electric will buy 74% of privately held Indian inverter manufacturer Luminous Power Technologies Pvt. Ltd. for about 215 million euros ($307 million) to boost its revenue and market share in India.

Schneider's eighth acquisition in India since 2000 is likely to raise its sales in the country to more than 45 billion rupees, tripling its 2009 revenue, said Olivier Blum, managing director, Schneider Electric India.

Luminous's founders said selling a majority stake was essential to gain financial muscle needed to access global markets and to ensure the longevity of the name.

"People like us are very sensitive to ownership rights, so we must have had good reason to say 'okay we are happy to give up our majority role, but we still want to participate,'" said Chairman Rakesh Malhotra, who co-founded Luminous along with Navneet Kapoor and Sunil Bhalla 20 years ago.

"Our reason was that the company now needs access to global markets for scaling up, it needs the strength of a balance sheet to take sizeable risks on growth, and it needs to access a product and technology platform which will widen the offerings around the brand," Mr. Malhotra said.

Schneider doesn't look at the transaction as a regular acquisition, but one in which branding is important because Luminous's products are sold in the retail market, Mr. Blum said.

"You have to be very close to the Indian consumer. We needed to learn about India, and through a partner was the best way to do it," he said.

The transaction was valued at 16 times Luminous's 2010-11 earnings before interest, taxes, depreciation and amortization. India, the seventh-largest market for Schneider's products, contributed roughly 3.5% of its global sales in the year to March 2010.

It currently operates in more than 100 countries, and reported global sales of 20 billion euros in 2010.

Luminous has significant market share in countries with an infrastructure deficit, such as Bangladesh, Pakistan and Nigeria. Its products include inverters for homes and small and medium-sized businesses, and uninterruptible power supply systems.

The company has sold nearly three million inverters through approximately 900 distributors and 25,000 points of sales.

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